ICFR is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.

 

Policies/procedures entailing a company’s ICFR are:

 

• Maintaining the company’s records with reasonable details, accuracy and fairness; reflecting the transactions and dispositions of the assets of the company

• Providing reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts/ expenditures of the company are prior management approvals.

• Providing reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Legal Requirements of IFC In India

• Schedule IV (II) (4):

Independent director shall satisfy themselves on the integrity of financial information and that of financial controls.

• Section 134(5)(e) of the Companies Act 2013:

The report by Board of Directors (BoD) shall include a statement ensuring implementation of adequate internal financial control and adherence of policy and procedures adopted by the company with an objective of orderly and efficient conduct of business, safeguarding company’s assets, prevention and detection of frauds for accuracy and completeness of the accounting records and timely preparation of reliable financial information.

• Section 143 (3) (i) of the Companies Act, 2013:

Auditor’s report should state the adequacy and operating effectiveness of the Company’s internal financial controls

• Rule 8(5)(viii) of the Companies (Accounts) Rules, 2014:

The Board of Directors’ report of all companies to state the details in respect of adequacy of internal financial controls with reference to the “financial statements”.